COLONIAL INVESTMENT GRADE MUNICIPAL TRUST ANNUAL REPORT
NOVEMBER 30, 2002
[PHOTO]
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
For a third consecutive year, the municipal bond market offered positive
returns. In general, the bond market was aided by strong demand, as investors
shied away from the stock market in light of economic uncertainty, corporate
scandals and the threat of war. Relatively stable interest rates were also an
aid to market performance. The Federal Reserve lowered short-term interest rates
early in the period and again late in the period as the economy struggled and
consumer confidence sagged. The volume of new municipal bonds increased as
cities and states faced budget deficits and revenue shortfalls. However,
investor demand for bonds also rose, and that helped support returns throughout
the year.
The following report will provide you with more detailed information about the
fund's performance and the investment strategies used by portfolio manager
Maureen Newman. As always, we thank you for choosing Colonial Investment Grade
Municipal Fund and for giving us the opportunity to help you build a strong
financial future.
/s/ Keith T. Banks
Keith T. Banks
President
o NOT FDIC INSURED o MAY LOSE VALUE o NO BANK GUARANTEE
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
PORTFOLIO MANAGER'S REPORT
For the 12-month period ended November 30, 2002, Colonial Investment Grade
Municipal Trust generated a total return of 6.36%, based on net asset value. The
trust outperformed the average 6.26% return of its peer group, the Lipper
General Municipal Debt Funds (Leveraged).
During the fiscal year, uncertainty pervaded the financial markets as weak
economic growth, concerns about corporate governance and geopolitical issues
dominated market sentiment. In this environment, investors sought safe havens
for their assets, and many turned to high-quality municipal bonds. Because the
trust had invested significant assets in high-quality, long duration bonds, it
was well positioned to take advantage of this emphasis on quality. (Duration
measures a bond's sensitivity to interest rate changes. See sidebar). The long
duration bonds in the portfolio were strong performers during market rallies and
the biggest contributors to the trust's return. The trust's leverage also
boosted its income stream, which, in turn, enhanced the income available for
distribution to the trust's shareholders.
Toward the end of the fiscal year, we sold some of the bonds that had performed
well and invested the proceeds in lower-rated investment grade bonds, which were
laggards for the entire fiscal period. We believe these securities have the
potential to perform well as economic growth improves. When adding bonds to the
portfolio, we found some of the best values in school districts, which are
supported by property taxes, and in the electric utility and housing sectors.
We have structured the portfolio to take advantage of a slowly improving economy
and a stable or slightly rising interest-rate environment. Because most states
project large budgetary imbalances, we have been cautious about investing in
areas that depend on state government spending and that may be affected by
spending cuts. We believe some of the best opportunities will continue to come
from the essential services sectors, such as utilities and water and sewer.
/s/ Maureen G. Newman
Maureen G. Newman
Maureen G. Newman is the portfolio manager of Colonial Investment Grade
Municipal Trust and a senior vice president of Colonial Management Associates,
Inc., an affiliate of Columbia Management Group. Ms. Newman received her BA in
economics from Boston College and her MBA from Babson College. She is a
Chartered Financial Analyst, a member of the Boston Security Analysts Society
and former chairman of the National Federation of Municipal Analysts.
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, resulting in a gain or loss on
sale.
Tax-exempt investing offers current tax-free income, but it also involves
certain risks. The value of the trust shares will be affected by interest rate
changes and the creditworthiness of issues held in the trust. Investing in high
yield securities offers the potential for high current income and attractive
total return, but involves certain risks. Lower-rated bond risks include default
of the issuer and rising interest rates. Interest income from certain tax-exempt
bonds may be subject to the federal alternative minimum tax for individuals and
corporations.
Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the trust.
PRICE PER SHARE AS OF 11/30/02 ($)
Net asset value 11.04
--------------------------------
Market price 10.09
--------------------------------
1-YEAR TOTAL RETURNS (%)
Net asset value 6.36
--------------------------------
Market price -1.10
--------------------------------
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/1/01-11/30/02 ($)
0.67
--------------------------------
A portion of the trust's income may be subject to the alternative minimum tax.
The trust may at times purchase tax-exempt securities at a discount from their
original issue price. Some or all of this discount may be included in the
trust's ordinary income, and any market discount is taxable when distributed.
TOP 10 INDUSTRY SECTORS AS OF 11/30/02 (%)
Local general obligations18.5
--------------------------------
State appropriated 8.4
--------------------------------
Hospitals 7.5
--------------------------------
Education 7.5
--------------------------------
Investor owned utilities 5.9
--------------------------------
State general obligations 5.6
--------------------------------
Special non-property tax 4.9
--------------------------------
Toll facilities 4.5
--------------------------------
Refunded/escrowed 4.5
--------------------------------
Water & sewer 4.0
--------------------------------
QUALITY BREAKDOWN AS OF
11/30/02 (%)
AAA 62.0
--------------------------------
AA 14.5
--------------------------------
A 4.9
--------------------------------
BBB 8.0
--------------------------------
BB 1.2
--------------------------------
Non-rated 7.8
--------------------------------
Cash equivalents 1.6
--------------------------------
Quality breakdowns are calculated as a percentage of total investments,
including short-term obligations. Ratings shown in the quality breakdown
represent the highest rating assigned to a particular bond by one of the
following nationally-recognized rating agencies: Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Sector
breakdowns are calculated as a percentage of net assets.
Because the trust is actively managed, there can be no guarantee that the fund
will continue to maintain this quality breakdown or invest in these sectors in
the future.
ABOUT DURATION
Duration is a measure, expressed in years, of interest-rate sensitivity. It's
similar to maturity, but because it takes into consideration the entire stream
of future principal and interest payments and how long it will take to collect
them, it is a more complex and also a more accurate measure of a trust's
exposure to changing interest rates.
Because we are active duration managers, we tend to use duration as a tactical
tool to anticipate or respond to interest rate changes. Because bond prices move
in the opposite direction that interest rates are moving, we lower duration when
we expect interest rates to rise and we raise duration when we expect interest
rates to fall. This adjustment provides the potential to benefit performance. If
we are wrong and interest rates rise after we lengthen duration or fall after we
shorten duration, fund performance could be hurt.
1
INVESTMENT PORTFOLIO
November 30, 2002
MUNICIPAL BONDS - 97.2% PAR VALUE
-------------------------------------------------------------
EDUCATION - 8.4%
EDUCATION - 7.5%
AL University of South Alabama,
Series 1999,
(a) 11/15/18 $2,500,000 $ 1,143,700
IL State University Auxiliary
Facilities, Series 1998,
5.500% 12/01/23 1,085,000 1,155,048
MA State College Building Authority,
Series 1999 A,
(a) 05/01/23 2,710,000 909,178
MA State Health & Educational
Facilities Authority, Brandeis
University, Series 1998 I,
4.750% 10/01/28 1,500,000 1,425,180
MA State Industrial Finance Agency:
Tabor Academy, Series 1998,
5.400% 12/01/28 1,000,000 967,460
Tufts University, Series 1998 H,
4.750% 02/15/28 1,000,000 955,910
MN University of Minnesota:
Series 1996 A,
5.750% 07/01/14 500,000 570,515
Series 1999 A,
5.500% 07/01/21 2,000,000 2,173,380
MO State Health & Educational
Facilities Authority Central Institute
for the Deaf, Series 1999,
5.850% 01/01/22 600,000 637,224
NY St. Lawrence County Industrial
Development Agency,
St. Lawrence University, Series 1998 A,
5.500% 07/01/13 1,465,000 1,606,021
TX Texas Tech University,
Series 1999,
5.000% 02/15/29 2,500,000 2,453,250
------------
13,996,866
------------
STUDENT LOAN - 0.9%
NE Nebhelp, Inc., Series 1993 A-6,
6.450% 06/01/18 1,500,000 1,669,020
------------
-----------------------------------------------------------
HEALTH CARE - 10.4%
CONGREGATE CARE RETIREMENT - 0.3%
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 500,000 474,955
------------
HOSPITALS - 7.5%
FL Orange County Health Facilities Authority,
Orlando Regional Healthcare System:
Series 1996 C,
6.250% 10/01/13 720,000 850,169
Series 1999,
6.000% 10/01/26 175,000 178,468
Series 2002,
5.750% 12/01/32 150,000 150,679
PAR VALUE
------------------------------------------------------------
FL South Broward Hospital District,
Series 2002,
5.625% 05/01/32 $1,000,000 $ 987,900
IL Southwestern Illinois Development
Authority, Anderson Hospital,
Series 1999,
5.375% 08/15/15 380,000 362,136
IL State Development Finance Authority,
Adventist Health System, Series 1999,
5.500% 11/15/20 900,000 879,210
IL State Health Facilities Authority,
Swedish American Hospital,
Series 2000,
6.875% 11/15/30 500,000 533,290
LA Jefferson Parish Hospital Service
District 2, Series 1998,
5.250% 07/01/12 1,000,000 1,062,710
LA State Public Facilities Authority,
Touro Infirmary, Series 1999 A,
5.625% 08/15/29 500,000 487,480
MA State Health & Educational Facilities
Authority, South Shore Hospital,
Series 1999 F,
5.750% 07/01/29 1,000,000 994,550
MD State Health & Educational
Facilities Authority, University of
Maryland Medical System,
Series 2000,
6.750% 07/01/30 250,000 269,365
MI Flint Hospital Building Authority,
Hurley Medical Center, Series 1998 B,
5.375% 07/01/28 500,000 421,220
MN St. Paul Housing & Redevelopment
Authority, Healtheast, Inc.,
Series 1993 B,
6.625% 11/01/17 250,000 213,907
NC State Medical Care Commission,
Gaston Health Care, Series 1998,
5.000% 02/15/29 1,010,000 941,572
NH Higher Educational & Health Facilities,
Catholic Medical Center, Series 1989,
6.000% 07/01/17 2,500,000 2,500,525
NV Henderson, Catholic Healthcare West,
Series 1999 A,
6.750% 07/01/20 500,000 521,780
NY New York City Industrial
Development Agency,
Staten Island University Hospital,
Series 2002 C,
6.450% 07/01/32 400,000 394,460
TN Metropolitan Government, Nashville
& Davidson Counties, Meharry Medical
College, Series 1996,
6.000% 12/01/16 1,575,000 1,825,630
TX Comal County Health Facilities
Development, McKenna Memorial,
Series 2002 A,
6.250% 02/01/32 (b) 500,000 486,235
------------
14,061,286
------------
See notes to investment portfolio.
2
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
-------------------------------------------------------------
HEALTH CARE (CONTINUED)
INTERMEDIATE CARE FACILITIES - 0.2%
IL State Development Finance Authority,
Hoosier Care, Inc., Series 1999 A,
7.125% 06/01/34 $ 475,000 $ 403,911
------------
NURSING HOMES - 2.4%
AK Juneau, St. Ann's Care Center,
Series 1999,
6.875% 12/01/25 500,000 493,170
CO Health Care Facilities Authority,
Pioneer Health Care, Series 1989,
10.500% 05/01/19 1,620,000 1,567,350
DE State Economic Development
Authority, Churchman Village
Project, Series 1991 A,
10.000% 03/01/21 920,000 1,001,696
PA Chester County Industrial Development
Authority, Pennsylvania Nursing
Home, Inc., Series 2002,
8.500% 05/01/32 765,000 709,629
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 565,000 339,000
WI State Health & Educational Facilities
Authority, Metro Health
Foundation, Inc., Series 1993,
11.000% 11/01/22 (c) 1,300,000 442,000
------------
4,552,845
------------
-----------------------------------------------------------
HOUSING - 3.1%
ASSISTED LIVING/SENIOR - 0.3%
TX Bell County Health Facilities
Development Corp., Care Institute, Inc.,
Series 1994,
9.000% 11/01/24 475,000 487,317
------------
MULTI-FAMILY - 2.5%
AZ Maricopa County Industrial
Development Authority,
National Health Facilities II Project,
5.100% 01/01/33 2,500,000 2,517,700
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000,
7.500% 07/01/40 500,000 510,210
FL Clay County Housing Finance Authority,
Madison Commons Apartments,
Series 2000 A,
7.450% 07/01/40 250,000 255,115
PAR VALUE
------------------------------------------------------------
MN White Bear Lake, Birch Lake
Townhome Project:
Series 1989 A,
10.250% 07/15/19 $ 775,000 $ 790,726
Series 1989 B,
(a) 07/15/19 (d) 678,000 459,674
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993 A,
8.500% 12/01/16 (e) 227,741 228,226
------------
4,761,651
------------
SINGLE FAMILY - 0.3%
CO State Housing Finance Authority,
Series 2000 B-2,
7.250% 10/01/31 320,000 342,086
IL Chicago, Series 2000 A,
7.150% 09/01/31 290,000 307,992
------------
650,078
------------
-----------------------------------------------------------
INDUSTRIAL - 2.0%
FOOD PRODUCTS - 0.5%
NE Washington County Waste Water
Facilities, Cargill, Inc., Series 2002,
5.900% 11/01/27 1,000,000 984,560
------------
FOREST PRODUCTS - 0.5%
MN International Falls, Boise Cascade
Corp., Series 1999,
6.850% 12/01/29 1,000,000 999,990
------------
MANUFACTURING - 0.9%
KS Wichita Airport Authority Facilities,
Cessna Citation Service Center,
Series 2002 A,
6.250% 06/15/32 475,000 484,647
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 805,000 850,813
MO State Development Finance Board,
Procter & Gamble Co., Series 1999,
5.200% 03/15/29 250,000 249,625
------------
1,585,085
------------
OIL & GAS - 0.1%
TX Gulf Coast Industrial Development
Authority, Citgo Petroleum,
Series 1998,
8.000% 04/01/28 (f) 250,000 257,352
------------
-----------------------------------------------------------
OTHER - 5.6%
OTHER - 0.3%
SC Tobacco Settlement Revenue
Management Authority,
Series 2001 B,
6.375% 05/15/28 400,000 389,920
See notes to investment portfolio.
3
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
-------------------------------------------------------------
OTHER (CONTINUED)
OTHER (CONTINUED)
WI Badger Tobacco Asset Securitization Corp.,
Series 2002,
6.375% 06/01/32 $ 250,000 $ 240,848
------------
630,768
------------
POOL/BOND BANK - 0.8%
FL State Municipal Loan Council,
Series 2000 A,
(a) 04/01/21 520,000 194,672
KS State Development Finance Authority,
Water Pollution Control,
5.500% 11/01/17 1,125,000 1,248,862
------------
1,443,534
------------
REFUNDED/ESCROWED (g) - 4.5%
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993,
(a) 01/01/23 5,250,000 1,817,760
CA State Educational Facilities Authority,
Santa Clara University, Series 1996,
5.000% 09/01/15 800,000 896,048
DC District of Columbia,
Series 1999 A,
5.375% 06/01/18 360,000 405,198
DE State Economic Development
Authority, Osteopathic Hospital
Association of Delaware,
Series 1992 A,
9.500% 01/01/22 215,000 241,709
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare System,
Series 1996 C,
6.250% 10/01/13 1,740,000 2,084,885
NC Lincoln County, Lincoln County
Hospital, Series 1991,
9.000% 05/01/07 105,000 121,146
NC State Municipal Power Agency,
Catawba No. 1, Series 1986,
5.000% 01/02/20 1,670,000 1,737,017
TN Shelby County, Health, Education
& Housing Facilities Board, Open
Arms Development Center:
Series 1992 A,
9.750% 08/01/19 425,000 541,875
Series 1992 C,
9.750% 08/01/19 425,000 541,935
------------
8,387,573
------------
-----------------------------------------------------------
OTHER REVENUE - 0.8%
RECREATION - 0.8%
DC District of Columbia,
Smithsonian Institution, Series 1997,
5.000% 02/01/28 1,000,000 976,010
PAR VALUE
-------------------------------------------------------------
FL Capital Trust Agency,
Seminole Tribe Convention Center,
Series 2002 A,
10.000% 10/01/33 $ 500,000 $ 514,575
------------
1,490,585
------------
-----------------------------------------------------------
RESOURCE RECOVERY - 1.2%
DISPOSAL - 0.6%
IL Development Finance Authority,
Waste Management, Inc., Series 1997,
5.050% 01/01/10 (f) 500,000 484,915
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Ogden Haverhill Project,
Series 1995,
9.000% 09/01/05 115,000 120,542
MI State Strategic Fund, United
Waste Systems, Inc.,
Series 1995,
5.200% 04/01/10 500,000 489,825
------------
1,095,282
------------
RESOURCE RECOVERY - 0.6%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Ogden Haverhill Project,
Series 1998 A,
5.450% 12/01/12 1,250,000 1,133,150
------------
-----------------------------------------------------------
TAX-BACKED - 39.6%
LOCAL APPROPRIATED - 1.7%
MN Hibbing Economic Development
Authority, Series 1997,
6.400% 02/01/12 335,000 340,474
MO St. Louis Industrial Development
Authority, St. Louis Convention
Center, Series 2000,
(a) 07/15/18 300,000 138,024
TX Houston, Series 2000,
6.400% 06/01/27 1,000,000 1,129,170
TX Houston Independent School
District, Public Facilities Corp.,
Series 1998 A,
(a) 09/15/13 2,500,000 1,535,000
------------
3,142,668
------------
LOCAL GENERAL OBLIGATIONS - 18.5%
AK North Slope Borough,
Series 2001 A,
(a) 06/30/12 2,000,000 1,312,820
CA Carlsbad Unified School District,
Series 1997,
(a) 05/01/22 2,730,000 957,111
CA Las Virgenes Unified School District,
Series 2001 C,
(a) 11/01/22 1,210,000 412,925
See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
-------------------------------------------------------------
TAX-BACKED (CONTINUED)
LOCAL GENERAL OBLIGATIONS (CONTINUED)
CA Los Angeles County, Series 1999 A,
(a) 08/01/21 $2,135,000 $ 785,701
CA Modesto High School District,
Stanislaus County, Capital Appreciation,
Series 2002 A,
(a) 08/01/19 1,350,000 570,834
CA Vallejo City Unified School District,
Series 2002 A,
5.900% 08/01/25 2,000,000 2,268,840
CA West Contra Costa Unified
School District,
Series 2001 B,
6.000% 08/01/24 250,000 286,810
CO El Paso County School District
No. 11, Colorado Springs,
Series 1996,
7.125% 12/01/19 1,870,000 2,398,238
CO Highlands Ranch Metropolitan
District, Series 1996,
6.500% 06/15/11 1,375,000 1,634,834
IL Chicago:
Series 1995 A-2,
6.250% 01/01/14 1,480,000 1,732,355
Series 1999,
5.500% 01/01/23 1,000,000 1,073,430
Series 2001 A,
(a) 01/01/15 3,000,000 1,672,920
IL Chicago Board of Education,
Series 1998 B-1:
(a) 12/01/11 1,000,000 679,320
(a) 12/01/21 2,000,000 713,700
IL St. Clair County,
Series 1999,
(a) 10/01/16 2,000,000 1,007,040
IL St. Clair County Public Building
Commission, Series 1997 B,
(a) 12/01/13 2,000,000 1,212,420
IL Will County School District No. 17,
Series 2001,
8.500% 12/01/15 1,400,000 1,948,506
MI Garden City School District,
Series 2001,
5.500% 05/01/16 325,000 349,684
MI St. Johns Public School, Series 1998,
5.100% 05/01/25 1,000,000 1,017,420
NY New York City, Series 1997 A,
7.000% 08/01/07 2,000,000 2,296,580
OH Olmsted Falls School District,
Series 1999,
5.500% 12/01/02 380,000 380,000
PA Erie, Series 2001 C,
(a) 11/15/26 2,000,000 541,220
PAR VALUE
-------------------------------------------------------------
TX Brenham, Certificates of Obligation,
Series 2001,
5.375% 08/15/16 $1,040,000 $ 1,108,765
TX Houston Independent School District,
Series 1999 A,
4.750% 02/15/22 5,000,000 4,816,550
TX Hurst Euless Bedford Independent
School District, Series 1998,
4.500% 08/15/25 2,500,000 2,293,125
TX La Joya Independent School District,
Series 1998,
5.500% 02/15/12 1,000,000 1,083,560
------------
34,554,708
------------
SPECIAL NON-PROPERTY TAX - 4.9%
CA San Diego Redevelopment Agency,
Capital Appreciation
Tax Allocation Center,
Series 2001,
(a) 09/01/21 3,725,000 1,366,218
CT State Special Tax Obligation
Infrastructure, Series 2001 A,
5.375% 10/01/16 500,000 539,145
FL Tampa Sports Authority,
Tampa Bay Arena Project, Series 1995,
5.750% 10/01/25 1,000,000 1,113,030
NM Dona Ana County, Series 1998,
5.500% 06/01/15 1,000,000 1,116,170
NY New York City Transitional
Finance Authority,
Series 1998 C,
4.750% 05/01/23 2,000,000 1,928,960
NY State Local Government
Assistance Corp.,
Series 1993 E,
5.000% 04/01/21 3,000,000 3,028,590
------------
9,092,113
------------
SPECIAL PROPERTY TAX - 0.5%
CA Contra Costa County Public Financing
Authority, Series 1992 A,
7.100% 08/01/22 365,000 372,767
CA Huntington Beach Community
Facilities District, Grand
Coast Resort, Series 2001,
6.450% 09/01/31 300,000 306,726
FL Double Branch Community
Development District,
Series 2002 A,
6.700% 05/01/34 335,000 333,670
FL Lexington Oaks Community
Development District,
Series 1998 B,
5.500% 05/01/05 15,000 15,046
------------
1,028,209
------------
See notes to investment portfolio.
5
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------
TAX-BACKED (CONTINUED)
STATE APPROPRIATED - 8.4%
IN State Office Building Commission,
Women's Prison, Series 1995 B,
6.250% 07/01/16 $2,820,000 $ 3,333,325
KY State Property & Buildings
Commission, Project No. 73,
Series 2001,
5.500% 11/01/14 455,000 495,440
NY New York State Dormitory Authority:
City University, Series 1993 A,
5.750% 07/01/18 5,000,000 5,684,550
Mental Health Services,
Series 1998 C,
5.000% 02/15/11 1,485,000 1,564,581
State University,
Series 2000 C,
5.750% 05/15/17 1,000,000 1,136,380
NY State Urban Development Corp.,
5.600% 04/01/15 1,000,000 1,108,220
UT State Building Ownership Authority,
Facilities Master Lease,
Series 1998 C,
5.500% 05/15/19 1,750,000 1,913,398
WV State Building Commission,
Series 1998 A,
5.375% 07/01/18 500,000 543,925
------------
15,779,819
------------
STATE GENERAL OBLIGATIONS - 5.6%
CA State, Series 1995,
5.750% 03/01/19 70,000 72,302
DC District of Columbia,
Series 1999 A,
5.375% 06/01/18 890,000 937,072
MA State, Series 1998 C,
5.250% 08/01/17 1,000,000 1,074,270
NJ State, Series 2001,
5.250% 07/01/16 2,000,000 2,178,840
PR Commonwealth of Puerto Rico:
Aqueduct & Sewer Authority,
Series 1995:
6.250% 07/01/12 1,000,000 1,189,110
6.250% 07/01/13 750,000 898,065
Series 2001,
5.500% 07/01/17 1,000,000 1,126,680
TX State, Series 1999 ABC,
5.500% 08/01/35 2,000,000 2,056,220
WA State, Series 1998 A,
4.500% 07/01/23 1,000,000 927,640
------------
10,460,199
------------
------------------------------------------------------------
PAR VALUE
------------------------------------------------------------
TRANSPORTATION - 11.2%
AIR TRANSPORTATION - 1.8%
CA Los Angeles Regional Airport
Improvement Corp.,
American Airlines, Inc.,
Series 2000 C,
7.500% 12/01/24 (f) $ 750,000 $ 575,662
IL Chicago O'Hare International Airport,
United Airlines, Inc., Series 2000 A,
6.750% 11/01/11 (h) 800,000 142,024
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992 A:
7.500% 02/01/12 250,000 213,787
7.500% 02/01/20 200,000 164,466
MN Minneapolis & St. Paul
Metropolitan Airport Commission,
Northwest Airlines,
Series 2001 A,
7.000% 04/01/25 350,000 256,406
NC Charlotte, US Airways, Inc.:
Series 1998,
5.600% 07/01/27 (i) 500,000 241,880
Series 2000,
7.750% 02/01/28 (i) 500,000 271,515
NY Port Authority of New York &
New Jersey JFK International
Air Terminal,
Series 1997,
6.250% 12/01/08 1,000,000 1,144,120
TX Houston Industrial Development
Corp., Air Cargo, Perot Development,
Series 2002,
6.000% 03/01/23 400,000 400,320
------------
3,410,180
------------
AIRPORTS - 3.3%
CO Denver City & County Airport,
Series 1997 E,
5.250% 11/15/23 110,000 111,340
MA State Port Authority:
Series 1998 D,
5.000% 07/01/28 2,500,000 2,459,100
Series 1999, IFRN,
10.020% 07/01/29 (f) 1,000,000 1,126,040
MN Minneapolis-St. Paul Metropolitan
Airport Commission, Series 1998,
5.250% 01/01/13 1,000,000 1,051,510
OH Cleveland Airport System,
Series 2001 A,
5.000% 01/01/31 1,465,000 1,451,830
------------
6,199,820
------------
See notes to investment portfolio.
6
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
-------------------------------------------------------------
TRANSPORTATION (CONTINUED)
TOLL FACILITIES - 4.5%
CA Foothill/Eastern Transportation
Corridor Agency, Series 1995 A,
5.000% 01/01/35 $1,000,000 $ 902,790
CA San Joaquin Hills Transportation
Corridor Agency, Series 1997 A,
(a) 01/15/15 2,000,000 1,119,800
CO State Public Highway Authority,
E-470, Series 1997 B,
(a) 09/01/11 2,000,000 1,376,840
MA State Turnpike Authority,
Series 1999 A:
4.750% 01/01/34 1,850,000 1,733,080
5.000% 01/01/39 2,000,000 1,950,960
NH State Turnpike Systems,
Series 1991 C, IFRN,
11.870% 11/01/17 (f) 1,000,000 1,301,520
------------
8,384,990
------------
TRANSPORTATION - 1.6%
IL Regional Transportation Authority,
Series 1994 C,
7.750% 06/01/20 1,000,000 1,346,680
NV State Department of Business &
Industry, Las Vegas Monorail Project,
Series 2000:
7.375% 01/20/30 250,000 242,655
7.375% 01/01/40 250,000 240,625
OH Toledo-Lucas County Port Authority,
CSX Transportation, Inc., Series 1992,
6.450% 12/15/21 (f) 1,000,000 1,057,070
------------
2,887,030
------------
-----------------------------------------------------------
UTILITY - 14.9%
INDEPENDENT POWER PRODUCER - 0.6%
MI Midland County Economic
Development Corp.,
Series 2000,
6.875% 07/23/09 600,000 598,590
NY New York City Industrial
Development Agency, Brooklyn
Navy Yard Partners, Series 1997,
5.650% 10/01/28 200,000 187,512
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration
Facilities, AES Project,
Series 2000,
6.625% 06/01/26 325,000 335,322
------------
1,121,424
------------
INVESTOR OWNED - 5.9%
AZ Maricopa County Pollution
Control Revenue,
El Paso Electric Co.,
Series 2002 A,
6.250% 05/01/37 (f) 500,000 501,885
PAR VALUE
------------------------------------------------------------
IN Petersburg, Indiana Power & Light Co.,
Series 1993 B,
5.400% 08/01/17 $3,000,000 $ 3,277,350
MI State Strategic Fund,
Detroit Edison Co.,
Series 1998 A,
5.550% 09/01/29 3,000,000 3,081,330
MS State Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 1,000,000 901,700
OH State Air Quality Development
Authority, Cleveland
Electric Illumination,
Series 2002 A,
6.000% 12/01/13 850,000 866,864
TX Brazos River Authority,
Pollution Control,
TXU Electric Co., Series 2001,
5.750% 05/01/36 (f) 500,000 451,255
TX Matagorda County Navigation
District No.1, Houston Light &
Power Co., Series 1997,
5.125% 11/01/28 (f) 2,000,000 1,962,220
------------
11,042,604
------------
JOINT POWER AUTHORITY - 2.5%
IN State Municipal Power Agency,
Series 1993 B,
6.000% 01/01/12 2,000,000 2,302,220
MA Municipal Wholesale Electric Co.,
Power Supply System, Project 6-A,
5.250% 07/01/14 1,000,000 1,073,670
NC State Municipal Power Agency.
Catawba Electric No. 1,
Series 1998 A,
5.500% 01/01/15 640,000 709,235
OH Municipal Electricity
Generation Agency,
Series 2001:
(a) 02/15/25 1,000,000 306,210
(a) 02/15/30 1,000,000 230,890
------------
4,622,225
------------
MUNICIPAL ELECTRIC - 1.9%
CA State Water Resources Authority,
Series 2002 A,
5.500% 05/01/14 1,000,000 1,108,670
NC University of North Carolina at
Chapel Hill, Series 1997,
(a) 08/01/14 1,000,000 590,800
NE Public Power District, Series 1998 A,
5.250% 01/01/11 500,000 539,780
TN Metropolitan Government, Nashville
& Davidson Counties, Series 1996 A,
(a) 05/15/09 1,825,000 1,431,895
------------
3,671,145
------------
See notes to investment portfolio.
7
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2002
MUNICIPAL BONDS (CONTINUED) PAR VALUE
-------------------------------------------------------------
UTILITY (CONTINUED)
WATER & SEWER - 4.0%
GA Atlanta, Series 1993,
5.500% 11/01/22 (j) $1,000,000 $ 1,074,400
MA State Water Resources Authority,
Series 1998 A,
4.750% 08/01/27 3,000,000 2,863,080
MS Five Lakes Utility District,
8.250% 07/15/24 140,000 130,900
NY New York City Municipal
Water Finance Authority,
Water & Sewer System, Capital
Appreciation, Series 1998 D,
(a) 06/15/20 3,900,000 1,590,030
WA King County, Series 1999,
5.250% 01/01/30 1,750,000 1,765,978
------------
7,424,388
------------
TOTAL MUNICIPAL BONDS
(cost of $174,020,433) 181,887,330
------------
MUNICIPAL PREFERRED STOCK - 0.3% SHARES
-----------------------------------------------------------
HOUSING - 0.3%
MULTI-FAMILY - 0.3%
Charter Municipal Mortgage
Acceptance Co.,
7.600% 11/30/50 (e)
(cost of $500,000) 500,000 545,625
------------
SHORT-TERM OBLIGATIONS - 1.6% PAR
-----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (K) - 1.6%
ID Health Facilities Authority Revenue,
St. Luke's Regional Medical Center,
Series 1995,
1.250% 05/01/22 $ 400,000 400,000
MS Jackson County Pollution Control,
Chevron USA, Inc., Series 1993,
1.300% 06/01/23 200,000 200,000
NY Long Island Power Authority,
Series 1998 B,
1.300% 05/01/33 1,900,000 1,900,000
NY New York,
Series 1993 A-7,
1.300% 08/01/21 500,000 500,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $3,000,000) 3,000,000
------------
TOTAL INVESTMENTS - 99.1%
(cost of $177,520,433)(l) 185,432,955
------------
OTHER ASSETS & LIABILITIES, NET - 0.9% 1,617,129
-----------------------------------------------------------
NET ASSETS* - 100.0% $187,050,084
------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) Settlement of this security is on a delayed delivery basis.
(c) This issuer is in default of certain debt covenants. Income is not being
fully accrued.
(d) Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws. At November 30, 2002, this security amounted
to $459,674, which represents 0.2% of net assets.
Additional information on this security is as follows:
Acquisition Acquisition
Security Date Cost
-------------------------------------------------------------
MN White Bear Lake,
Birch Lake Townhome Project,
Series 1989 B,
(a) 07/15/19 07/19/89 $ 678,000
(e) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At November 30, 2002, the value
of these securities amounted to $773,851, which represents 0.4% of net
assets.
(f) Interest rates on variable rate securities change periodically. The rate
listed is as of November 30, 2002.
(g) The Trust has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
principal and interest.
(h) As of November 30, 2002, the Trust held bonds of United Airlines, Inc.,
representing 0.1% of net assets. United Airlines, Inc. filed for bankruptcy
protection under Chapter 11 on December 9, 2002.
(i) As of November 30, 2002, the Trust held securities of certain issuers that
have filed for bankruptcy protection under Chapter 11 representing 0.3% of
net assets.
(j) This security, or a portion thereof with a market value of $612,408, is
being used to collateralize open futures contracts.
(k) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of November 30, 2002.
(l) Cost for generally accepted accounting principles is $177,520,433. Cost for
federal income tax purposes is $177,277,411. The difference between cost for
generally accepted accounting principles and cost on a tax basis is related
to amortization/accretion tax elections on fixed-income securities.
Short futures contracts open at November 30, 2002:
PAR VALUE UNREALIZED
COVERED BY EXPIRATION APPRECIATION
TYPE CONTRACTS MONTH AT 11/30/02
-----------------------------------------------------------------
Municipal Bond Index $ 1,200,000 March $ 7,875
10 Year U.S. Treasury Note 36,300,000 March 177,656
------------
$185,531
------------
ACRONYM NAME
-------------------------------------------------------------
IFRN Inverse Floating Rate Note
* Net assets represent both Common Shares and Auction Preferred Shares.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2002
ASSETS:
Investments, at cost $177,520,433
------------
Investments, at value $185,432,955
Cash 75,660
Receivable for:
Investments sold 30,000
Interest 2,914,454
Deferred Trustees' compensation plan 5,481
Other assets 416
------------
Total Assets 188,458,966
------------
LIABILITIES:
Payable for:
Investments purchased on a
delayed delivery basis 487,689
Futures variation margin 121,937
Distributions-- common shares 614,011
Distributions-- preferred shares 964
Management fee 98,055
Pricing and bookkeeping fees 6,487
Trustees' fee 268
Audit fee 23,920
Deferred Trustees' fee 5,481
Other liabilities 50,070
------------
Total Liabilities 1,408,882
------------
Auction Preferred Shares (2,400 shares issued and
outstanding at $25,000 per share) $ 60,000,000
------------
COMPOSITION OF NET ASSETS
APPLICABLE TO COMMON SHARES:
Paid-in capital-- common shares $126,993,094
Undistributed net investment income 624,554
Accumulated net realized loss (8,665,617)
Net unrealized appreciation on:
Investments 7,912,522
Futures contracts 185,531
------------
Net assets at value applicable to 11,509,000
common shares of beneficial interest
outstanding $127,050,084
------------
Net asset value per common share $ 11.04
------------
STATEMENT OF OPERATIONS
For the Year Ended November 30, 2002
INVESTMENT INCOME:
Interest $10,635,151
------------
EXPENSES:
Management fee 1,218,623
Pricing and bookkeeping fees 97,484
Trustees' fee 12,221
Preferred shares remarketing commissions 150,170
Custody fee 9,567
Other expenses 143,880
------------
Total Expenses 1,631,945
Custody earnings credit (877)
------------
Net Expenses 1,631,068
------------
Net Investment Income 9,004,083
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 900,956
Futures contracts (2,189,993)
------------
Net realized loss (1,289,037)
------------
Net change in unrealized appreciation/
depreciation on:
Investments 913,536
Futures contracts (258,564)
------------
Net change in unrealized
appreciation/depreciation 654,972
------------
Net Loss (634,065)
------------
Net Increase in Net Assets from Operations 8,370,018
------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (870,588)
------------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 7,499,430
------------
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2002 2001
------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 9,004,083 $ 8,682,715
Net realized gain (loss) on investments and futures contracts (1,289,037) 1,614,053
Net change in unrealized appreciation/depreciation on investments and futures contracts 654,972 4,304,408
----------- -----------
Net Increase from Operations 8,370,018 14,601,176
----------- -----------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (870,588) (1,811,142)
----------- -----------
Net Increase in Net Assets from Operations Applicable to Common Shares 7,499,430 12,790,034
----------- -----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (7,722,539) (6,882,385)
----------- -----------
Total Increase (Decrease) in Net Assets Applicable to Common Shares (223,109) 5,907,649
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 127,273,193 121,365,544
----------- -----------
End of period (including undistributed net investment income of
$624,554 and $44,867, respectively) $127,050,084 $127,273,193
----------- -----------
NUMBER OF TRUST SHARES:
Common Shares:
Outstanding at end of period 11,509,000 11,509,000
----------- -----------
Preferred Shares:
Outstanding at end of period 2,400 2,400
----------- -----------
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
November 30, 2002
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Colonial Investment Grade Municipal Trust (the "Trust") is a Massachusetts
business trust registered under the Investment Company Act of 1940 (the "Act"),
as amended, as a diversified, closed-end management investment company. The
Trust's investment goal is to seek as high a level of after-tax total return as
is consistent with prudent risk, by pursuing current income generally exempt
from ordinary federal income tax and opportunities for long-term appreciation
from a portfolio primarily invested in investment grade municipal bonds. The
Trust is authorized to issue an unlimited number of common shares of beneficial
interest and 2,400 Auction Preferred Shares ("APS").
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS:
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Trust may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Trust to subsequently invest at less advantageous prices.
FEDERAL INCOME TAXES:
Consistent with the Trust's policy to qualify as a regulated investment company
and to distribute all of its taxable and tax-exempt income, no federal income
tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of the security with a corresponding
increase in the cost basis. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
Effective December 1, 2001, the Trust adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began accreting market
discount on all debt securities. The cumulative effect of this accounting change
did not impact total net assets of the Trust, but resulted in reclassifications
as follows, based on securities held by the Trust on December 1, 2001:
NET UNREALIZED
COST APPRECIATION
------ --------------
$168,976 $(168,976)
The effect of this change, for the year ended November 30, 2002, was as follows:
NET INVESTMENT NET REALIZED NET UNREALIZED
INCOME GAINS APPRECIATION
------ ------- ------------
$101,681 $(27,635) $(74,046)
The Statement of Changes in Net Assets and Financial Highlights for prior
periods have not been restated to reflect this change.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to common shareholders are recorded on the ex-date.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the APS is
generally seven days. The applicable dividend rate for the APS on November 30,
2002 was 1.24%. For the year ended November 30, 2002, the Trust declared
dividends to Auction Preferred shareholders amounting to $870,588 representing
an average APS dividend rate of 1.45%.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for discount
accretion on debt securities, straddle deferrals, mark-to-market on futures
contracts, current year distribution payable, capital loss carryforwards and
non-deductible expenses. Reclassifications are made to the Trust's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the year ended November 30, 2002, permanent items identified and
reclassified among the components of net assets are as follows:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME LOSS CAPITAL
------ ------- ------------
$(245) $245 $--
Net investment income, net realized gain (loss) and net assets were not affected
by this reclassification.
The tax character of distributions paid to common and APS shareholders during
the year was as follows:
TAX-EXEMPT
ORDINARY INCOME INCOME
------------ ----------------
$88,367 $8,504,760
As of November 30, 2002, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED
TAX-EXEMPT UNREALIZED
INCOME APPRECIATION
------------ ----------------
$1,228,626 $8,341,075
The following capital loss carryforwards are available to reduce taxable income
arising from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2003 $ 172,808
2004 1,454,485
2008 3,464,384
2010 1,238,884
-----------
$6,330,561
-----------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Colonial Management Associates, Inc. (the "Advisor") is the investment advisor
of the Trust and furnishes accounting and other services and office facilities
for a fee to be paid monthly at the annual rate of 0.65% of the Trust's average
weekly net assets, including assets applicable to the APS.
PRICING AND BOOKKEEPING FEES:
The Advisor is responsible for providing pricing and bookkeeping services to the
Trust under a Pricing and Bookkeeping Agreement. Under a separate agreement (the
"Outsourcing Agreement"), the Advisor has delegated those functions to State
Street Bank and Trust Company ("State Street"). The Advisor pays fees to State
Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Trust, the Advisor receives
from the Trust an annual flat fee of $10,000, paid monthly, and in any month
that the Trust's average weekly net assets, including assets applicable to the
APS, are more than $50 million, a monthly fee equal to the average weekly net
assets, including assets applicable to the APS, of the Trust for that month
multiplied by a fee rate that is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. For the year ended
November 30, 2002, the net asset based fee rate was 0.036%. The Trust also pays
out-of-pocket costs for pricing services.
OTHER:
The Trust pays no compensation to its officers, all of whom are employees of the
Advisor or its affiliates.
The Trust's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Trust's assets.
The Trust has an agreement with its custodian bank under which $877 of custody
fees were reduced by balance credits for the year ended November 30, 2002. The
Trust could have invested a portion of the assets utilized in connection with
the expense offset arrangement in an income-producing asset if it had not
entered into such an agreement.
NOTE 4. PREFERRED SHARES
The Trust currently has outstanding 2,400 APS. The APS are redeemable at the
option of the Trust on any dividend payment date at the redemption price of
$25,000 per share, plus an amount equal to any dividends accumulated on a daily
basis unpaid through the redemption date (whether or not such dividends have
been declared).
Under the Act, the Trust is required to maintain asset coverage of at least 200%
with respect to the APS as of the last business day of each month in which any
APS are outstanding. Additionally, the Trust is required to meet more stringent
asset coverage requirements under the terms of the APS and in accordance with
the guidelines prescribed by the rating agencies. Should these requirements not
be met, or should dividends accrued on the APS not be paid, the Trust may be
restricted in its ability to declare dividends to common shareholders or may be
required to redeem certain of the APS. At November 30, 2002, there were no such
restrictions on the Trust.
Under Emerging Issues Task Force ("EITF") promulgation Topic D-98,
Classification and Measurement of Redeemable Securities, which was issued on
July 19, 2001, preferred securities that are redeemable for cash or other assets
are classified outside of permanent equity to the extent that the redemption is
at a fixed or determinable price and at the option of the holder or upon the
occurrence of an event that is not solely within the control of the issuer.
Subject to the guidance of the EITF, the Trust's preferred shares, which were
previously classified as a component of net assets, have been reclassified
outside of permanent equity (net assets) in the accompanying financial
statements. Prior year amounts have also been reclassified to conform with this
presentation. The impact of this reclassification creates no change to the net
assets available to common shareholders.
12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the year ended November 30, 2002, purchases and sales of investments, other
than short-term obligations, were $19,278,287 and $24,716,777, respectively.
Unrealized appreciation (depreciation) at November 30, 2002, based on cost of
investments for federal income tax purposes, was:
Gross unrealized appreciation $ 13,415,076
Gross unrealized depreciation (5,259,532)
-----------
Net unrealized appreciation $ 8,155,544
-----------
OTHER:
The Trust had greater than 10% of its net assets at November 30, 2002, invested
in issuers located in each of the following states; New York, Texas and
Massachusetts.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
The Trust may invest in municipal and U.S. Treasury futures contracts and
purchase and write options on futures. The Trust will invest in these
instruments to hedge against the effects of changes in the value of portfolio
securities due to anticipated changes in interest rates and/or market
conditions, for duration management, or when the transactions are economically
appropriate to the reduction of risk inherent in the management of the Trust and
not for trading purposes. The use of futures contracts and options involves
certain risks, which include: (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out positions due to different trading hours, or the temporary absence of
a liquid market, for either the instrument or the underlying securities or (3)
an inaccurate prediction by the Advisor of the future direction of interest
rates. Any of these risks may involve amounts exceeding the amount recognized in
the Trust's Statement of Assets and Liabilities at any given time.
Upon entering into a futures contract, the Trust deposits cash or securities
with its custodian in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Trust equal to the
daily change in the contract value and are recorded as variation margin payable
or receivable and offset in unrealized gains or losses. The Trust recognizes a
realized gain or loss when the contract is closed or expires. Refer to the
Trust's Investment Portfolio for a summary of open futures contacts at November
30, 2002.
13
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
PERIOD
YEAR ENDED NOVEMBER 30, ENDED YEAR ENDED DECEMBER 31,
----------------------------------- NOVEMBER 30, ------------------------
2002 2001 2000 1999 (a) 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 10.55 $ 10.31 $ 11.49 $ 11.43 $ 10.87
------------ ----------- ----------- ------------ ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.78(b)(c) 0.75(c) 0.81(d) 0.58 0.60 0.62
Net realized and unrealized gain (loss)
on investments and futures contracts (0.05)(b) 0.52 0.27 (1.12) 0.07 0.58
------------ ----------- ----------- ------------ ----------- ----------
Total from Investment Operations 0.73 1.27 1.08 (0.54) 0.67 1.20
------------ ----------- ----------- ------------ ----------- ----------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.08) (0.16) (0.22) (0.05) -- --
------------ ----------- ----------- ------------ ----------- ----------
Total from Investment Operations
Applicable to Common Shareholders 0.65 1.11 0.86 (0.59) 0.67 1.20
------------ ----------- ----------- ------------ ----------- ----------
LESS DISTRIBUTIONS DECLARED
TO COMMON SHAREHOLDERS:
From net investment income (0.67) (0.60) (0.60) (0.52) (0.61) (0.64)
In excess of net investment income -- -- -- -- --(e) --
------------ ----------- ----------- ------------ ----------- ----------
Total Distributions Declared
to Common Shareholders (0.67) (0.60) (0.60) (0.52) (0.61) (0.64)
------------ ----------- ----------- ------------ ----------- ----------
LESS SHARE TRANSACTIONS:
Commission and offering
costs-- preferred shares -- -- (0.02) (0.07) -- --
------------ ----------- ----------- ------------ ----------- ----------
NET ASSET VALUE, END OF PERIOD $ 11.04 $ 11.06 $ 10.55 $ 10.31 $ 11.49 $ 11.43
------------ ----------- ----------- ------------ ----------- ----------
Market price per share-- common shares $ 10.09 $ 10.87 $ 8.92 $ 9.06 $ 11.19 $ 10.56
------------ ----------- ----------- ------------ ----------- ----------
Total return-- based on market
value-- common shares (f) (1.10)% 29.28% 5.20% (14.64)%(g) 11.94% 10.76%
------------ ----------- ----------- ------------ ----------- ----------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (h)(i) 1.28% 1.28% 1.31% 1.03%(j) 0.77% 0.83%
Net investment income before preferred
stock dividend (h)(i) 7.06%(b) 6.80% 7.91% 5.75%(j) 5.24% 5.63%
Net investment income after preferred
stock dividend (h)(i) 6.38%(b) 5.38% 5.80% 5.26%(j) 5.24% 5.63%
Portfolio turnover rate 10% 31% 23% 25%(g) 24% 21%
Net assets, end of period (000's)-- common shares $ 127,050 $ 127,273 $ 121,366 $ 118,660 $ 132,242 $ 131,503
(a)The Trust changed its fiscal year end from December 31 to November 30.
(b)Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change, for the
year ended November 30, 2002, was to increase net investment income per share
by $0.01, increase net realized and unrealized loss per share by $0.01,
increase the ratio of net investment income to average net assets from 6.98%
to 7.06% and increase the ratio of net investment income (adjusted for
dividend payments to preferred shareholders) from 6.30% to 6.38%, Per share
data and ratios for periods prior to November 30, 2002 have not been restated
to reflect this change in presentation.
(c)Per share data was calculated using average shares outstanding during the
period.
(d)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e)Rounds to less than $0.01 per share.
(f)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(g)Not annualized.
(h)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i)Ratios reflect average net assets available to common shares only.
(j)Annualized.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE PER SHARE PER SHARE
-------------------------------------------------------------------------------------------------------------------------------
11/30/02 $60,000,000 $77,937 $25,000 $25,000
11/30/01 60,000,000 78,030 25,005 25,000
11/30/00 60,000,000 75,569 25,009 25,000
11/30/99* 60,000,000 74,444 25,003 25,000
* On August 26, 1999, the Trust began offering Auction Preferred Shares.
14
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 9.93 $ 11.05 $ 10.96 $ 11.09
----------- ----------- ------------ ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.63 0.64 0.67 0.79 0.85
Net realized and unrealized gain (loss) on
investments and futures contracts (0.19) 1.11 (1.12) 0.09 (0.13)
----------- ----------- ------------ ----------- ----------
Total from Investment Operations 0.44 1.75 (0.45) 0.88 0.72
----------- ----------- ------------ ----------- ----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.62) (0.63) (0.67) (0.79) (0.85)
----------- ----------- ------------ ----------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.87 $ 11.05 $ 9.93 $ 11.05 $ 10.96
----------- ----------- ------------ ----------- ----------
Market price per share-- common shares $ 10.13 $ 9.88 $ 9.25 $ 10.75 $ 11.75
----------- ----------- ------------ ----------- ----------
Total return-- based on market value--common shares (a) 9.06% 13.87% (8.12)% (2.16)% 7.43%
----------- ----------- ------------ ----------- ----------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (b) 0.88% 1.08% 0.94% 0.87% 0.86%
Net investment income (b) 5.80% 6.08% 6.46% 7.08% 7.76%
Portfolio turnover rate 20% 37% 34% 35% 18%
Net assets, end of period (000's)-- common shares $ 125,125 $ 127,118 $ 114,260 $ 127,213 $ 126,169
(a)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(b)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
15
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INVESTMENT GRADE MUNICIPAL
TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Investment Grade Municipal
Trust (the "Trust") at November 30, 2002, and the results of its operations, the
changes in its net assets and its financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 2002 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 20, 2003
16
UNAUDITED INFORMATION
FEDERAL INCOME TAX INFORMATION
98.97% of the distributions from net investment income will be treated as exempt
income for federal income tax purposes.
17
DIVIDEND REINVESTMENT PLAN
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), all
shareholders whose shares are registered in their own names will have all
distributions reinvested automatically in additional shares of the Trust by
EquiServe Trust Company, N.A. (the "Plan Agent") unless a shareholder elects to
receive cash. Shareholders whose shares are held in the name of a broker or
nominee will have distributions reinvested automatically by the broker or
nominee in additional shares under the Plan, unless the service is not provided
by the broker or the nominee or the shareholder elects to receive distributions
in cash. If the service is not available, such distributions will be paid in
cash. Shareholders whose shares are held in the name of a broker or nominee
should contact the broker or nominee for details. All distributions to
shareholders who elect not to participate in the Plan will be paid by check
mailed directly to the shareholder of record on the record date therefore by the
Plan Agent as the dividend disbursing agent.
Non-participants in the Plan will receive distributions in cash. Distributions
payable to participants in the Plan will be applied by the Plan Agent, acting as
agent for Plan participants, to the purchase of shares of the Trust. Such shares
will be purchased by the Plan Agent at the then current market price of such
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to his
account under the Plan will be issued and a cash payment will be made for any
fraction of a share credited to such account. A shareholder's notice of election
to withdraw from the Plan must be received by the Plan Agent before the record
date for a dividend in order to be given effect with respect to that dividend.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered in
such shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There is no charge to Plan participants for reinvesting distributions. The Plan
Agent's fees for the handling of the reinvestment of distributions will be paid
by the Trust. Each participant in the Plan will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions. Purchase orders
from the participants in the Plan may be combined with those of other
participants and the price paid by any particular participant may be the average
of the price paid on various orders executed on behalf of groups of participants
in the Plan.
The automatic reinvestment of distributions will not relieve participants of any
income tax that may be payable on such dividends or distributions.
The Plan may be amended or terminated on 30 days' written notice to Plan
participants. All correspondence concerning the Plan should be directed to
EquiServe Trust Company, N.A., by mail at P.O. Box 43010, Providence, RI
02940-3010, or by phone at 1-800-730-6001.
18
TRUSTEES
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and officers of Colonial Investment Grade Municipal Trust, the
year each was first elected or appointed to office, their principal business
occupations during at least the last five years, the number of portfolios
overseen by each Trustee, and other directorships they hold are shown below.
Year first Number of
elected or portfolios in fund Other
Position with appointed Principal occupation(s) complex overseen directorships
Name, address and age Liberty Funds1 to office during past five years by trustee held
------------------------------------------------------------------------------------------------------------------------------------
Disinterested Trustees
----------------------
Douglas A. Hacker (age 47) Trustee 1996 Executive Vice President-Strategy of United Airlines 103 None
c/o Liberty Funds Group LLC since December 2002 (formerly President of UAL
One Financial Center Loyalty Services and Executive Vice President
Boston, MA 02111 of United Airlines (airline) from September 2001
to December 2002; formerly Executive Vice
President from July 1999 to September 2001);
Chief Financial Officer of United Airlines since
July 1999; Senior Vice President and Chief
Financial Officer of UAL, Inc. prior thereto
Janet Langford Kelly (age 45) Trustee 1996 Executive Vice President-Corporate Development 103 None
c/o Liberty Funds Group LLC and Administration, General Counsel and
One Financial Center Secretary, Kellogg Company (food manufacturer),
Boston, MA 02111 since September 1999; Senior Vice President,
Secretary and General Counsel, Sara Lee
Corporation (branded, packaged, consumer-
products manufacturer) prior thereto
Richard W. Lowry (age 66) Trustee 1995 Private Investor since 1987 (formerly 105*** None
c/o Liberty Funds Group LLC Chairman and Chief Executive Officer, U.S.
One Financial Center Plywood Corporation (building products
Boston, MA 02111 manufacturer))
Salvatore Macera (age 71) Trustee 1998 Private Investor since 1981 (formerly Executive 103 None
c/o Liberty Funds Group LLC Vice President and Director of Itek Corporation
One Financial Center (electronics) from 1975 to 1981)
Boston, MA 02111
Charles R. Nelson (age 60) Trustee 1981 Professor of Economics, University of Washington, 118* None
c/o Liberty Funds Group LLC since January 1976; Ford and Louisa Van Voorhis
One Financial Center Professor of Political Economy, University of
Boston, MA 02111 Washington, since September 1993; Director,
Institute for Economic Research, University of
Washington, since September2001; Adjunct
Professor of Statistics, University of Washington,
since September 1980; Associate Editor, Journal
of Money Credit and Banking, since September,
1993; Trustee, Columbia Funds since July 2002;
consultant on economic and statistical matters
John J. Neuhauser (age 59) Trustee 1985 Academic Vice President and Dean of Faculties 105*** Saucony, Inc.
c/o Liberty Funds Group LLC since August 1999, Boston College (formerly (athletic footwear)
One Financial Center Dean, Boston College School of Management and SkillSoft Corp.
Boston, MA 02111 from September 1977 to September 1999) (e-learning)
Thomas E. Stitzel (age 66) Trustee 1998 Business Consultant since 1999 (formerly 103 None
c/o Liberty Funds Group LLC Professor of Finance from 1975 to 1999 and Dean
One Financial Center from 1977 to 1991, College of Business, Boise State
Boston, MA 02111 University); Chartered Financial Analyst
1 In December 2000, the board of each of the Liberty Funds and Stein Roe Funds
were combined into one board of trustees with common membership. The date
shown is the earliest date on which a trustee was elected to either the
Liberty board or the former Stein Roe Funds board.
19
TRUSTEES (CONTINUED)
Year first Number of
elected or portfolios in fund Other
Position with appointed Principal occupation(s) complex overseen directorships
Name, address and age Liberty Funds to office during past five years by trustee held
------------------------------------------------------------------------------------------------------------------------------------
Disinterested Trustees
----------------------
Thomas C. Theobald (age 65) Trustee 1996 Managing Director, William Blair Capital Partners 103 Xerox Corporation
c/o Liberty Funds Group LLC (private equity investing) since September 1994 (business products
One Financial Center (formerly Chief Executive Officer and Chairman and services),
Boston, MA 02111 of the Board of Directors, Continental Bank Anixter International
Corporation) (network support
equipment distributor),
Jones Lang LaSalle
(real estate management
services) and MONY
Group (life insurance)
Anne-Lee Verville (age 57) Trustee 1998 Author and speaker on educational systems needs 103 Chairman of the
c/o Liberty Funds Group LLC (formerly General Manager, Global Education Board of Directors,
One Financial Center Industry from 1994 to 1997, and President, Enesco Group, Inc.
Boston, MA 02111 Applications Solutions Division from 1991 to (designer, importer
1994, IBM Corporation (global education and and distributor of
global applications)) giftware and
collectibles)
Interested Trustees
-------------------
William E. Mayer** (age 62) Trustee 1994 Managing Partner, Park Avenue Equity Partners 105*** Lee Enterprises
c/o Liberty Funds Group LLC (private equity fund) since February 1999 (print and online
One Financial Center (formerly Founding Partner, Development Capital media), WR Hambrecht
Boston, MA 02111 LLC from November 1996 to February 1999; + Co. (financial
Dean and Professor, College of Business and service provider),
Management, University of Maryland from First Health (health
October 1992 to November 1996) care) and Systech
Retail Systems
(retail industry
technology provider)
Joseph R. Palombo** (age 49) Trustee 2000 Chief Operating Officer of Columbia 103 None
One Financial Center and Management Group, Inc. (Columbia Management
Boston, MA 02111 Chairman Group) since November 2001; formerly Chief
of the Operations Officer of Mutual Funds, Liberty
Board Financial Companies, Inc. from August 2000 to
November 2001; Executive Vice President of Stein
Roe & Farnham, Incorporated (Stein Roe) since
April 1999; Executive Vice President and Director
of Colonial Management Associates, Inc. since
April 1999; Executive Vice President and Chief
Administrative Officer of Liberty Funds Group
LLC (LFG) since April 1999; Director of Stein Roe
since September 2000; Trustee and Chairman of
the Board of Stein Roe Mutual Funds since
October 2000; Manager of Stein Roe Floating
Rate Limited Liability Company since October
2000; Vice President of Galaxy Funds since September
2002; (formerly Vice President of Liberty Funds
from April 1999 to August 2000; Chief Operating
Officer and Chief Compliance Officer, Putnam
Mutual Funds from December 1993 to March 1999)
* In addition to serving as a disinterested trustee of Liberty Funds, Mr.
Nelson serves as a disinterested director of Columbia Funds, currently
consisting of 15 funds, which are advised by an affiliate of the Advisor.
** Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 ("1940 Act")) by reason of his affiliation with WR Hambrecht +
Co, a registered broker-dealer. Mr. Palombo is an interested person as an
employee of an affiliate of the Advisor.
*** In addition to serving as a trustee of Liberty Funds, Mr. Lowry, Mr.
Neuhauser and Mr. Mayer each serve as a director/trustee of Liberty
All-Star Funds, currently consisting of 2 funds, which are advised by an
affiliate of the Advisor.
20
OFFICERS
Year first
elected or
Position with appointed
Name, address and age Liberty Funds to office Principal occupation(s) during past five years
------------------------------------------------------------------------------------------------------------------------------------
Keith T. Banks (age 47) President 2001 President of Liberty Funds since November 2001; President, Chief Investment
Columbia Management Group, Inc. Officer and Chief Executive Officer of Columbia Management Group or its
590 Madison Avenue, 36th Floor predecessor since August 2000; President, Chief Executive Officer and Chief
New York, NY 10022 Investment Officer of Fleet Investment Advisors Inc. since 2000 (formerly
Managing Director and Head of U.S. Equity, J.P. Morgan Investment Management
from November 1996 to August 2000); President of Galaxy Funds since September
2002
Vicki L. Benjamin (age 41) Chief 2001 Controller of Liberty Funds, Stein Roe and Liberty All-Star Funds since May
One Financial Center Accounting 2002; Chief Accounting Officer of Liberty Funds, Stein Roe and Liberty All-Star
Boston, MA 02111 Officer Funds since June 2001; Controller and Chief Accounting Officer of Galaxy Funds
since September 2002; Vice President of Liberty Funds since April 2001 (formerly
Vice President, Corporate Audit, State Street Bank and Trust Company from May
1998 to April 2001; Audit Manager from July 1994 to June 1997; Senior Audit
Manager from July 1997 to May 1998, Coopers & Lybrand, LLP)
J. Kevin Connaughton (age 38) Treasurer 2000 Treasurer of Liberty Funds and Liberty All-Star Funds since December 2000
One Financial Center (formerly Controller of the Liberty Funds and Liberty All-Star Funds from
Boston, MA 02111 February 1998 to October 2000); Treasurer of Stein Roe Funds since February 2001
(formerly Controller from May 2000 to February 2001); Treasurer of Galaxy Funds
since September 2002; Senior Vice President of Liberty Funds since January 2001
(formerly Vice President from April 2000 to January 2001; Vice President of
Colonial Management Associates, Inc. from February 1998 to October 2000; Senior
Tax Manager; Coopers & Lybrand, LLP from April 1996 to January 1998)
Jean S. Loewenberg (age 57) Secretary 2002 Secretary of Liberty Funds, Stein RoeFunds and Liberty All-Star Funds since
One Financial Center February 2002; General Counsel of Columbia Management Group since December 2001;
Boston, MA 02111 Senior Vice President since November 1996, Assistant General Counsel since
September 2002 of Fleet National Bank (formerly Senior Vice President and Group
Counsel of Fleet National Bank from November 1996 to September 2002)
21
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TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Investment Grade Municipal Trust is:
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
800-730-6001
The fund mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-345-6611. In addition,
representatives at that number can provide shareholders information about the
fund.
Financial advisors who want additional information about the fund may speak to a
representative at 800-426-3750.
This report has been prepared for shareholders of Investment Grade Municipal
Trust.
COLONIAL INVESTMENT GRADE MUNICIPAL TRUST ANNUAL REPORT
130-02/041M-1102 (01/03) 02/3050